Investors Eye Moves as Pressure Mounts on Biden

Investors are analyzing various economic scenarios and trade-offs in the event that a strong Democratic candidate develops as a result of the turmoil surrounding President Joe Biden’s 2024 reelection quest. Following Joe Biden’s unimpressive performance versus Republican Donald Trump in a recent TV debate, bond yields increased. The possibility of Donald Trump’s victory on November 5 led investors to predict higher fiscal deficits and inflationary policies.

The party controlling the White House exerts significant influence over trade, regulations, and economic policy. U.S. stocks rose last week, partly due to expectations of tax cuts and fewer regulations under a potential Republican victory. Though some Democrats are pleading with him to change his mind, Biden reiterated his ambitions to run for reelection in an interview with ABC News. This uncertainty can lead to market volatility and impact economic estimates.

Running Point Capital Advisors partner Michael Schulman stated, “A candidate change increases uncertainty for the stock or bond markets.” If Biden leaves office, investors will need a plan. The S&P 500 is currently trading at 21.4 times future 12-month earnings, which is higher than the long-term average of 15.7, according to John Lynch, chief investment officer at Comerica Wealth Management.

A strong Democratic candidate could reverse the Treasuries sell-off that followed the debate, some bond investors said. Historically, the S&P 500 has performed well under Democratic presidents, but a second Trump term could mean lower corporate taxes and tougher trade policies.